Photo of Marian A. Kornilowicz

Marian A. Kornilowicz is a Partner and the Chair of its Business Transactions Group of Cohen Seglias. His practice is concentrated in the representation of clients in varied business transactions and real estate matters. Engagements include the acquisition, sale, and leasing of real estate, representing title companies, underwriters and insureds in varied title matters, preparing condominium documents, and counseling condominium associations.

Have you ever been in a situation where your subcontractor or fabricator did not have the financial ability to purchase material needed for a project? Have you ever offered your assistance by way of either directly purchasing the material and providing it to the subcontractor/fabricator or advancing funds to the subcontractor/fabricator to allow for the purchase? While this arrangement has its advantages, contractors should be aware of their exposure, particularly if the subcontractor/fabricator has financial issues down the road. Even though a contractor fronts the funds to purchase the materials, it could lose its interest in those materials to the subcontractor/fabricator’s lender, especially if that lender holds a security interest in the subcontractor/fabricator’s inventory.  Continue Reading Contractors: Protect your Investment in Materials

December 21, 2012 was the effective date of the Philadelphia Lead Paint Bill 100011-A (the “Ordinance”), which amended Chapter 6-800 of the Philadelphia Code and established new lead paint disclosure and certification requirements for certain residential rental properties. The Ordinance places a substantial burden on the owners of affected properties (“Targeted Properties”), requiring costly and burdensome inspections and certifications regarding the presence of lead paint older housing units. The Ordinance also applies to existing leases, requiring property owners to comply with the Ordinance within ninety days of the effective date, or March 21, 2013.

Certain properties were exempted from the Ordinance:

  • housing units in which children six years of age and younger will not be residing during the lease term;
  • student housing owned by educational or academic institutions;
  • buildings leased entirely to college or university students;
  • housing units owned or subsidized by the Philadelphia Housing Authority; and
  • units leased under the HUD Housing Choice Voucher Program, more commonly referred to as Section 8.

The Ordinance requires that when entering into a lease with a residential tenant, an owner of a Targeted Property must provide both the tenant and the Philadelphia Department of Public Health with a certification from a certified lead inspector, stating that the Targeted Property is either (i) lead safe or (ii) lead free. A certification that the property is lead safe is valid for two years, whereas a certification that the property is lead free is permanent in nature. If an owner fails to obtain one of the required lead certification before leasing a Targeted Property, the owner may be liable to the City of Philadelphia and/or the tenant for up to double the cost of the following expenses: (i) inspection of the leased property, (ii) rent abatement, (iii) injunctive relief necessary to compel the owner’s compliance with the Ordinance, (iv) attorneys’ fees and costs, and (v) exemplary damages of up to $2,000 per offense. Owners of a Targeted Property must annually certify their compliance with the requirements of the Ordinance or risk having their housing inspection license revoked.

Additionally, owners must notify tenants, in writing, that it is the tenant’s responsibility to periodically inspect the property and notify the owner of the presence of deteriorated paint, which is defined in the Ordinance as paint that is either cracking, flaking, chipping, peeling, chalking, not intact or otherwise separating from the substrate of a building component, except that pinholes and hairline fractures attributable to the settling of a building shall not be considered deteriorated coating. Upon such notification, the owner must promptly make the necessary repairs.

Owners should be careful not to violate other existing laws while trying to comply or exempt themselves from the Ordinance. For example, while properties not occupied by persons under the age of six are exempt, owners must be careful not to inquire if a potential tenant has children or intends to have children under the age of six living in the property, because inquiring about children when leasing a residential property may be a violation of the Pennsylvania Human Relations Act or the Federal Fair Housing Act. The Owner may only inquire if children will reside in the property after the owner has made a firm offer to rent to that tenant.

Marian A. Kornilowicz is the Chair of the Business Practice Group of Cohen Seglias Pallas Greenhall & Furman PC. His practice is concentrated in the representation of clients in varied business transactions and real estate matters. 

Alex Barth is an Associate at Cohen Seglias Pallas Greenhall & Furman PC and a member of the Business Practice Group.

As commercial property owners and their tenants assess the damage caused by Hurricane Sandy, they need to understand their rights and obligations under leases, mortgage loan documents, and insurance policies.

LEASE PROVISIONS

As a result of storm damage, many buildings were temporarily uninhabitable or sustained such significant damage as to be uninhabitable or untenantable for the foreseeable future. The question becomes what rights and obligations do a tenant and landlord have under the terms and provisions of their lease? It should be kept in mind that these terms and provisions were negotiated and decided when the lease was executed.

First, it is necessary to understand the difference between a service interruption and casualty. A service interruption or disruption involves, for example, a loss of utility service to a property, thereby interfering with the tenant’s use of the property. A casualty involves the inability of the tenant to use or possess the property because of physical damage to the property itself.

Generally, commercial leases prepared by landlords will not provide for rent abatement or lease termination in the event the landlord fails to provide utilities or services. However, the lease should be checked because sometimes landlords will agree to abate if utilities or services are not provided for some period of time.

Commercial leases will often consider the extent of damage and the time necessary to restore or rebuild. For example, a lease may distinguish between partial and total casualty where the former means that the tenant was or is unable to use a portion of the leased space and the latter means that the entire leased space is unusable or untenantable.

The lease may provide for rent abatement in the event of a partial casualty and even the right to terminate if the premises cannot or are not restored within a certain period of time. Generally, a landlord’s lease may provide for a pro-rata abatement of at least the basic rent during the any period in which the tenant is actually dispossessed, but only to the extent of such dispossession.

If a total casualty has occurred, landlords under most commercial leases have the option, but not the obligation, to rebuild/restore the building. Tenants may or may not have the option of terminating the lease under certain circumstances such as if the landlord is unable or does not rebuild within a set period of time or if the casualty occurs toward the end of a lease term.

INSURANCE COVERAGE

Both tenants and landlords need to not only understand what coverage is provided by their insurance policies, but also to provide immediate notice of any potential claims to their insurance carriers as required under the applicable policy. Additionally, it is extremely important to fully document the damages sustained so as to preserve rights under the policy, and to ensure that the claim can be properly defended if challenged by the insurer. Tenants and landlords should be talking to the insurance brokers to review and understand available coverage, and the notice provisions required under their policies.

Typically, under a commercial lease, a landlord insures the building structure and common areas and the tenant is required to purchase insurance coverage on any improvements it made to its leased space, and its personal property. Commercial property insurance is intended to cover losses from fire, theft and natural disasters. However, such policies do not cover property losses caused by flood, which are only covered by a separate flood insurance policy.

In the event that a landlord or tenant has lost business income because, for example, the landlord had to provide tenants with rent abatements, or the tenant has been unable to conduct business because the leased property is untenantable, it is important to determine whether the effected business has business interruption coverage. This type of coverage is not part of a standard property policy and is intended to reimburse the business owner for loss profits and fixed expenses incurred as a result of the interruption of the business.

LOAN DOCUMENT PROVISIONS

To protect themselves against damage to their collateral, lenders place provisions in the loan documents specifying the insurance to be carried by the borrower and the borrower’s obligations in the event of a casualty loss. (These provisions are negotiable, to a degree, at the time of the loan.) A borrower is required to notify the lender in the event of a casualty loss of a certain magnitude. Additionally, the lender almost always is entitled to collect the proceeds of insurance, and can elect to either apply it to the loan balance or, under certain circumstances, escrow it and apply it to the cost of repairs to the collateral.

In the event of a casualty loss, it is important to understand the obligations owed the lender under the loan documents, and to ensure that the borrower complies with those obligations so as to avoid being declared in default. Additionally, in the event that significant repairs are required to the building, the borrower will want to negotiate with the lender to avoid any delays in gaining access to the insurance payments necessary to make the necessary repairs.

The Firm has extensive experience in commercial real estate and insurance coverage matters, and is available to answer any questions or respond to any issues that you may have. Questions concerning leases and mortgages issues can be directed to Marian A. Kornilowicz, Esquire, and concerning insurance coverage matters to Jonathan A. Cass, Esquire.

Marian A. Kornilowicz is the Chair of the Business Practice Group of Cohen Seglias Pallas Greenhall & Furman PC. His practice is concentrated in the representation of clients in varied business transactions and real estate matters.

Jonathan A. Cass is a the Chair of the Insurance Coverage & Risk Management Group at Cohen Seglias Pallas Greenhall & Furman, PC. He has extensive experience representing insureds and insurers in insurance coverage disputes.

By: Marian A. Kornilowicz

The Pennsylvania Department of State Corporation Bureau (Corporate Bureau) identifies entities that may no longer be in existence in order to make their names available for use by new active entities. To make sure your business name is protected, most Pennsylvania businesses are required to file a report called the “Decennial Report of Association Continued Existence” (the Decennial Report) every 10 years. 54 Pa.C.S.A. §503.

Specifically, “associations,” which include in this context most foreign and domestic corporations, limited liability companies, limited partnerships, and business trusts, must file a Decennial Report with the Corporation Bureau between January 1, 2011 and December 31, 2011, unless the “association” came into existence after January 1, 2002 or had made another filing since that date (e.g., an address or name change).

If an “association” fails to file a Decennial Report prior to January 1, 2012, and is not exempt from doing so, it shall no longer be deemed to be registered and will lose the exclusive right to its name. After January 1, 2012, any other business entity may request and use the name. A late filing of a Decennial Report would reinstate the name of the “association” unless its name has been appropriated during the period of the delinquency. 54 Pa.C.S.A. §504.

More information is available at Corporation Bureau and Decennial Report form is also available. The state filing fee is $70.

If you require any assistance in the filing of a Decennial Report or have any questions relating to Decennial Reports or any other corporate matter, please contact Marian A. Kornilowicz, Esquire at 215 564-1700 or mak@cohenseglias.com.

Marian A. Kornilowicz is the chair of the Business Practice Group of Cohen Seglias Pallas Greenhall & Furman PC. His practice is concentrated in the representation of clients in varied business transactions and real estate matters.